Co-Investment Fund Overcomes Runway Conundrum
24 October, 2013
Co-Investment Fund Overcomes Runway Conundrum
Recently founded Co-Investment Fund with USD 6 billion of initial capital helped Georgian Government to find a solution to the stagnated new runway construction project at Tbilisi International Airport managed by Turkish TAV Georgia, Prime Minister Bidzina Ivanishvili said during his meeting with media on 18 October 2013. He did not specify details of the solution but underlined that
although the Fund may not participate in the runway project, it did a good job to show TAV that there was a real alternative and thus had an indirect positive impact.
“They [TAV Georgia] saw that there is an alternative and I can say publicly now that, when we said ‘if you do not want this, we will do better’, it helped the investor to make his decision and we found a decent way out at last. We will retain investors and have a better airport,” Ivanishvili said, adding that when you have the USD 6 billion investment fund in Georgia, you are no longer in a position of a wretched man who goes crazy [with happiness] if someone drops a dollar.
TAV started construction of a new runway in September 2012 in compliance with the new memorandum concluded with Georgian Government; however, it was requested to stop the works in spring of 2013 by the new ruling power Georgian Dream which came into the office after the parliamentary elections of October 2012. New authorities decided to revise the state contract with TAV signed in 2005 and handing Tbilisi and Batumi airports to TAV Georgia with operation and management right until 2027, as the administration found the contract infringing the state interests. In September 2012, TAB signed a new memorandum with the Georgian state to invest additional USD 60 million in the construction of a new runway as the existing one is already outdated, and in exchange its management period in Tbilisi airport was extended by ten years to 2037. Since the new Authorities questioned the contract relevance, it sent a revised 200-page version of the contract to the investor in this summer and TAV is still perusing the paper-work and making no comments whether it intends to go ahead or if the investment Fund has aided to find any solution at all. Neither economic ministry of Georgia was able to name the date when the revised contract with TAV would take off. They prefer to wait more in search of best terms for them.
While the contract is pending for final solution, speculations that the operating runway is hazardous and flight to Tbilisi airport is risky were instigated by Georgian Airways largely known as Airzena. The head of Airzena urges authority to prompt its decision on constructing a new runway. Foreign air-companies operating at Tbilisi airport find a runway safe enough. Giorgi Kodua, Head of Amalgamation of Civil Aviation Professionals of Georgia and Consultant of Air Caucasus, as well as a number of economic analysts believe Airzena management is blackmailing Tbilisi airport to scare competitor companies off and enjoy high profit margin thanks to reduced competition.
“If the runway is risky for life why Airzena is implementing flights itself?” Kodua wonders. According to him, it is an open secret that the operational runway is outdated and not comfortable but within the security standards. It is a legacy from the old Soviet airport and thanks to high standards of that time, it turned out to be durable.
“Officially it is calculated to withstand 100 tons but can take 200 tons. In fact Soviet standards envisaged double the capacity and the current runway can operate without problems until the new one is constructed,” Kodua elaborates. “It is simple to guess that Airzena is simply trying to scare competitors off. Reduced competition means increased prices and passengers will be at loss.”

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